##### Table of Contents



UNITED


STATES 
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
 For the quarterly period ended September 30, 2005
 or
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from  to
 Commission file number 333-43157
 NORTHLAND CABLE TELEVISION, INC.
  STATE OF WASHINGTON
    
    91-1311836(State or other jurisdiction of incorporation)
    
    (I.R.S. Employer Identification No.)
  NORTHLAND CABLE NEWS, INC.
  STATE OF WASHINGTON
    
    91-1638891(State or other jurisdiction of incorporation)
    
    (I.R.S. Employer Identification No.)101 STEWART STREET, SUITE 700SEATTLE, WASHINGTON
    
    98101(Address of principal executive offices)
    
    (Zip Code)
 (206) 621-1351
  þ o
  o þ
  o þ




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TABLE OF CONTENTS  PART 1  FINANCIAL INFORMATIONITEM 1. Financial StatementsITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 4. CONTROLS AND PROCEDURESPART II  OTHER INFORMATIONITEM 1 Legal proceedingsITEM 2 Changes in securitiesITEM 3 Defaults upon senior securitiesITEM 4 Submission of matters to a vote of security holdersITEM 5 Other informationITEM 6 Exhibits and Reports on Form 8-KSIGNATURESEXHIBIT 31.(A)EXHIBIT 31.(B)EXHIBIT 32.(A)EXHIBIT 32.(B)    Table of Contents  
  
  
 September 30,
    
    
    December 31,2005
    
    
    2004ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    4,505,095
    
    
    $
    913,878Due from Parent and affiliates
    
    
    688,020
    
    
    
    819,553Accounts receivable, net
    
    
    1,095,373
    
    
    
    1,098,644Prepaid expenses
    
    
    669,386
    
    
    
    483,351Total current assets
    
    
    6,957,874
    
    
    
    3,315,426Investment in Cable Television Properties:Property and equipment, net of accumulated
depreciation of $72,211,838 and $67,373,869
respectively
    
    
    38,518,084
    
    
    
    41,293,290Franchise agreements, net of accumulated amortization
of $38,923,291
    
    
    39,509,437
    
    
    
    39,504,437Goodwill, net of accumulated amortization
of $2,407,104
    
    
    3,937,329
    
    
    
    3,937,329Other intangible assets, net of accumulated amortization
$3,251,103 and $3,231,686, respectively
    
    
    25,885
    
    
    
    45,302Total investment in cable television properties
    
    
    81,990,735
    
    
    
    84,780,358System sale receivable
    
    
    128,392
    
    
    
    433,200Loan fees, net of accumulated amortization of $3,164,913
and $2,782,038, respectively
    
    
    961,439
    
    
    
    1,298,814Total assets
    
    $
    90,038,440
    
    
    $
    89,827,798LIABILITIES AND SHAREHOLDERS DEFICITCurrent Liabilities:Accounts payable
    
    $
    211,641
    
    
    $
    747,973Subscriber prepayments
    
    
    1,542,260
    
    
    
    1,343,651Accrued expenses
    
    
    8,232,503
    
    
    
    4,732,046Converter deposits
    
    
    84,407
    
    
    
    93,604Due to affiliates
    
    
    108,287
    
    
    
    36,203Current portion of notes payable
    
    
    8,300,000
    
    
    
    3,400,000Total current liabilities
    
    
    18,479,098
    
    
    
    10,353,477Notes payable, net of current portion
    
    
    103,060,000
    
    
    
    109,660,000Deferred tax liabilities
    
    
    2,298,341
    
    
    
    1,006,408Total liabilities
    
    
    123,837,439
    
    
    
    121,019,885Shareholders Deficit:Common stock (par value $1.00 per share, authorized
50,000 shares; 10,000 shares issued and outstanding)
and additional paid-in capital
    
    
    12,359,377
    
    
    
    12,359,377Accumulated deficit
    
    
    (46,158,376
    )
    
    
    (43,551,464
    )Total shareholders deficit
    
    
    (33,798,999
    )
    
    
    (31,192,087
    )Total liabilities and shareholders deficit
    
    $
    90,038,440
    
    
    $
    89,827,798




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##### Table of Contents



For the nine months ended September 30,2005
    
    
    2004Service revenues
    
    $
    37,918,807
    
    
    $
    37,340,197Expenses:Cable system operations (including
$9,404, net received from and $93,014, net paid to
affiliates in 2005 and 2004, respectively), exclusive
of depreciation and amortization shown below
    
    
    16,241,847
    
    
    
    15,364,051General and administrative (including
$1,914,049 and $1,781,830, net paid to affiliates in
2005 and 2004, respectively)
    
    
    6,962,354
    
    
    
    6,846,636Other operating loss
    
    
    38,000
    
    
    
    Management fees paid to Parent
    
    
    1,895,940
    
    
    
    1,867,010Depreciation and amortization
    
    
    6,215,936
    
    
    
    6,892,725(Gain) loss on disposal of assets
    
    
    (264,352
    )
    
    
    302,35431,089,725
    
    
    
    31,272,776Income from operations
    
    
    6,829,082
    
    
    
    6,067,421Other income (expense):Interest expense and amortization of loan fees
    
    
    (8,758,885
    )
    
    
    (8,699,563
    )Other, net
    
    
    46,111
    
    
    
    39,072(8,712,774
    )
    
    
    (8,660,491
    )Loss from continuing operations before income tax expense
    
    
    (1,883,692
    )
    
    
    (2,593,070
    )Income tax expense
    
    
    (1,298,818
    )
    
    
    (695,803
    )Loss from continuing operations
    
    
    (3,182,510
    )
    
    
    (3,288,873
    )Discontinued operations (note 4)Income from operations of Navasota system (including
gain on sale of systems of $665,448 in 2005)
    
    
    719,905
    
    
    
    46,004Loss from sale of Port Angeles System
    
    
    (144,307
    )
    
    
    Net loss
    
    $
    (2,606,912
    )
    
    $
    (3,242,869
    )




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For the three months ended September 30,2005
    
    
    2004Service revenues
    
    $
    12,888,804
    
    
    $
    12,534,211Expenses:Cable system operations (including
$2,731 and $4,227, net received from affiliates
in 2005 and 2004, respectively), exclusive of
depreciation and amortization shown below
    
    
    5,544,914
    
    
    
    5,195,792General and administrative (including
$686,139 and $634,484, net paid to affiliates in
2005 and 2004, respectively)
    
    
    2,435,469
    
    
    
    2,387,953Other operating loss
    
    
    38,000
    
    
    
    Management fees paid to Parent
    
    
    644,440
    
    
    
    626,711Depreciation and amortization
    
    
    1,992,556
    
    
    
    2,333,001Gain on disposal of assets
    
    
    (651
    )
    
    
    (49,379
    )10,654,728
    
    
    
    10,494,078Income from operations
    
    
    2,234,076
    
    
    
    2,040,133Other income (expense):Interest expense and amortization of loan fees
    
    
    (2,912,695
    )
    
    
    (2,927,824
    )Other, net
    
    
    24,423
    
    
    
    7,756(2,888,272
    )
    
    
    (2,920,068
    )Loss from continuing operations before income tax expense
    
    
    (654,196
    )
    
    
    (879,935
    )Income tax expense
    
    
    (450,224
    )
    
    
    (163,481
    )Loss from continuing operations
    
    
    (1,104,420
    )
    
    
    (1,043,416
    )Discontinued operations (note 4)Income from operations of Navasota system (including
gain on sale of systems of $665,448 in 2005)
    
    
    669,005
    
    
    
    9,872Loss from sale of Port Angeles System
    
    
    (144,307
    )
    
    
    Net loss
    
    $
    (579,722
    )
    
    $
    (1,033,544
    )




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For the nine months ended September 30,2005
    
    
    2004CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (2,606,912
    )
    
    $
    (3,242,869
    )Adjustments to reconcile net loss to
cash provided by operating activities:Depreciation and amortization
    
    
    6,259,835
    
    
    
    7,009,574Amortization of loan fees
    
    
    382,875
    
    
    
    417,708(Gain) loss on disposal of assets
    
    
    (822,969
    )
    
    
    302,354Deferred income taxes
    
    
    1,291,933
    
    
    
    690,000Other
    
    
    93,296
    
    
    
    89,886(Increase) decrease in operating assets, net of systems sold:Accounts receivable
    
    
    28,037
    
    
    
    259,942Prepaid expenses
    
    
    (209,441
    )
    
    
    (328,658
    )Due from Parent and affiliates
    
    
    131,533
    
    
    
    (106,523
    )Increase (decrease) in operating liabilities, net of systmes sold:Accounts payable and accrued expenses
    
    
    2,924,505
    
    
    
    1,882,496Due to affiliates
    
    
    72,084
    
    
    
    (46,490
    )Converter deposits
    
    
    (8,537
    )
    
    
    (16,493
    )Subscriber prepayments
    
    
    200,549
    
    
    
    (79,547
    )Net cash provided by operating activities
    
    
    7,736,788
    
    
    
    6,831,380CASH FLOWS FROM INVESTING ACTIVITIES:Investment in cable television properties
    
    
    (3,971,601
    )
    
    
    (6,776,825
    )Proceeds from sale of cable system, net
    
    
    1,283,687
    
    
    
    3,990,778Proceeds from related party insurance fund
    
    
    285,543
    
    
    
    Proceeds from disposal of assets
    
    
    7,300
    
    
    
    6,900Franchises and other intangibles
    
    
    (5,000
    )
    
    
    (10,768
    )Net cash used in investing activities
    
    
    (2,400,071
    )
    
    
    (2,789,915
    )CASH FLOWS FROM FINANCING ACTIVITIES:Principal payments on borrowings
    
    
    (1,700,000
    )
    
    
    (2,240,000
    )Loan fees
    
    
    (45,500
    )
    
    
    (121,399
    )Net cash used in financing activities
    
    
    (1,745,500
    )
    
    
    (2,361,399
    )INCREASE IN CASH
    
    
    3,591,217
    
    
    
    1,680,066CASH, beginning of period
    
    
    913,878
    
    
    
    2,134,254CASH, end of period
    
    $
    4,505,095
    
    
    $
    3,814,320SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash paid during the period for interest
    
    $
    5,757,456
    
    
    $
    5,737,872Cash paid during the period for state income taxes
    
    $
    6,885
    
    
    $
    5,803




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(1) Basis of Presentation
   (2) Intangible Assets
   2005 (3 months)
    
    
    130,4382006
    
    
    521,7522007
    
    
    309,249$
    961,439
  2005 (3 months)
    
    
    6,4712006
    
    
    19,414$
    25,885
 (3) Amended and Restated Senior Credit Facility




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March 31, 2005
    
    
    0.80 to 1.00June 30, 2005
    
    
    0.80 to 1.00September 30, 2005
    
    
    0.80 to 1.00December 31, 2005
    
    
    0.90 to 1.00
      PrincipalPayments2005 (3 months)
    
    $
    850,0002006
    
    
    10,510,000Total
    
    $
    11,360,000




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(4) System Sales




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As ofDecember 31,2004Cash
    
    $
    3,530Accounts receivable
    
    
    33,723Prepaid expenses
    
    
    3,745Property and equipment (net of accumulated
depreciation of $1,156,138)
    
    
    415,988Total assets
    
    $
    456,986Accounts payable and accrued expenses
    
    $
    63,877Deposits
    
    
    632Subscriber prepayments
    
    
    12,770Total liabilities
    
    $
    77,279




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For the nine months ended September 30,2005
    
    
    2004Service revenues
    
    $
    389,533
    
    
    $
    565,870Expenses:Cable systems operations (including $30,240 and $40,815,
net paid to affiliates in 2005 and 2004, respectively),
exclusive of depreciation and amortization shown below
    
    
    184,241
    
    
    
    250,690General and
administrative (including $64,061 and $91,616, net paid to affiliates in 2005 and 2004, respectively)
    
    
    87,459
    
    
    
    124,034Management fees paid to Parent
    
    
    19,477
    
    
    
    28,293Depreciation and amortization
    
    
    43,899
    
    
    
    116,849Gain on disposal of assets
    
    
    (665,448
    )
    
    
    (330,372
    )
    
    
    519,866Income from operations of Navasota system, net
    
    $
    719,905
    
    
    $
    46,004
 For the three months ended September 30,2005
    
    
    2004Service revenues
    
    $
    52,761
    
    
    $
    180,269Expenses:Cable systems operations (including $6,882 and $13,958,
net paid to affiliates in 2005 and 2004, respectively),
exclusive of depreciation and amortization shown below
    
    
    28,473
    
    
    
    81,204General and administrative (including $9,887 and
$29,554 paid to affiliates in 2005 and 2004, respectively)
    
    
    11,897
    
    
    
    41,258Management fees paid to Parent
    
    
    2,638
    
    
    
    9,013Depreciation and amortization
    
    
    6,196
    
    
    
    38,922Gain on disposal of assets
    
    
    (665,448
    )
    
    
    (616,244
    )
    
    
    170,397Income from operations of Navasota system, net
    
    $
    669,005
    
    
    $
    9,872




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PART I
 
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 Results of Operations  Nine Months Ended September 30, 2005 and 2004
   
    
    $24.5 million (64%) from basic services
    
    $3.9 million (11%) from expanded basic services
    
    $3.7 million (10%) from high-speed Internet services
    
    $2.0 million (5%) from premium services
    
    $1.5 million (4%) from advertising
    
    $600,000 (2%) from digital services
    
    $1.7 million (4%) from other sources




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Nine Months Ended September 30,2005
    
    2004EBITDA:EBITDA
    
    $
    12,780,666
    
    
    $
    13,262,500Depreciation and amortization expense
    
    
    (6,215,936
    )
    
    
    (6,892,725
    )Gain (loss) on disposal of assets
    
    
    264,352
    
    
    
    (302,354
    )Income from operations
    
    
    6,829,082
    
    
    
    6,067,421Interest expense and amortization of loan fees
    
    
    (8,758,885
    )
    
    
    (8,699,563
    )Other, net
    
    
    46,111
    
    
    
    39,072Loss from continuing operations before
income tax expense
    
    
    (1,883,692
    )
    
    
    (2,593,070
    )Income tax expense
    
    
    (1,298,818
    )
    
    
    (695,803
    )Loss from continuing operations
    
    $
    (3,182,510
    )
    
    $
    (3,288,873
    )EBITDA MARGIN:EBITDA
    
    $
    12,780,666
    
    
    $
    13,262,500Service Revenues
    
    $
    37,918,807
    
    
    $
    37,340,197EBITDA Margin
    
    
    33.7
    %
    
    
    35.5
    %




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Results of Operations  Three Months Ended September 30, 2005 and 2004
   
    
    $8.2 million (64%) from basic services
    
    $1.5 million (12%) from high-speed Internet services
    
    $1.2 million (9%) from expanded basic services
    
    $700,000 (5%) from premium services
    
    $500,000 (4%) from advertising
    
    $200,000 (2%) from digital services
    
    $600,000 (4%) from other sources
        Liquidity and Capital Resources




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Amended and Restated Senior Credit Facility
     March 31, 2005
    
    
    0.80 to 1.00June 30, 2005
    
    
    0.80 to 1.00September 30, 2005
    
    
    0.80 to 1.00December 31, 2005
    
    
    0.90 to 1.00




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PrincipalPayments2005 (3 months)
    
    $
    850,0002006
    
    
    10,510,000Total
    
    $
    11,360,000
   System Sales




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Obligations and Commitments
  Payments Due By PeriodLess than
    
    1  3
    
    3  5
    
    More thanTotal
    
    1 year
    
    years
    
    years
    
    5 yearsNotes payable
    
    $
    111,360,000
    
    
    $
    8,300,000
    
    
    $
    103,060,000
    
    
    $
    
    
    
    $
    Minimum operating
lease payments
    
    
    239,613
    
    
    
    82,218
    
    
    
    124,904
    
    
    
    31,291
    
    
    
    1,200Total
    
    $
    111,599,613
    
    
    $
    8,382,218
    
    
    $
    103,184,904
    
    
    $
    31,291
    
    
    $
    1,200
 (a)
    
    These contractual obligations do not include accounts payable and accrued
liabilities, which are expected to be paid in 2005.(b)
    
    The Company also rents utility poles in its operations. Amounts due under these
agreements are not included in the above minimum operating lease payments as, generally,
pole rentals are cancelable on short notice. The Company does, however, anticipate that
such rentals will recur.(c)
    
    Note that obligations related to the Companys credit facilities exclude interest
expense.
 Capital Expenditures




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Recently Issued Accounting Pronouncements
  Critical Accounting Policies




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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
 ITEM 4. CONTROLS AND PROCEDURES




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ITEM 1 Legal proceedings
  
 ITEM 2 Changes in securities
  
 ITEM 3 Defaults upon senior securities
  
 ITEM 4 Submission of matters to a vote of security holders
  
 ITEM 5 Other information
  
 ITEM 6 Exhibits and Reports on Form 8-K
  31
    
    (a). Certification of Chief Executive Officer dated November 14,
2005 pursuant to section 302 of the Sarbanes-Oxley Act31
    
    (b). Certification of President (Principal Financial and
Accounting Officer) dated November 14, 2005 pursuant to section 302 of the
Sarbanes-Oxley Act32
    
    (a). Certification of Chief Executive Officer dated November 14,
2005 pursuant to section 906 of the Sarbanes-Oxley Act32
    
    (b). Certification of President (Principal Financial and
Accounting Officer) dated November 14, 2005 pursuant to section 906 of the
Sarbanes-Oxley Act




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SIGNATURES
  NORTHLAND CABLE TELEVISION, INC. AND SUBSIDIARY
 SIGNATURES
    
    CAPACITIES
    
    DATE/s/ RICHARD I. CLARK
    
    Executive Vice President, Treasurer
and Assistant Secretary
    
    11-14-05Richard I. Clark/s/ GARY S. JONES
    
    President
    
    11-14-05Gary S. Jones